Business Review, Q3 2020

Q3 of 2020 was a lot more fruitful for the company than Q2. Internet has fully resumed in Ethiopia and Teseteo are now on a priority-list with Ethio Telecom. Our office is fitted with high quality A grade fibre internet and there are 12 staff working full time. 10 of these have been promoting the UK Government's Green Energy Initiative on behalf of a British client. The other two employees are focusing on recruitment assignments that involve CV formatting and candidate resourcing. It has been a long slog to get where we are - but I am pleased to say the business is generating sustainable cashflow + we are able to expand further (150m2 workspace). As with any operation such as ours, a lot of work must be done in the background to become established and this becomes tenfold in a country such as Ethiopia where bureaucracy is an issue. Attaining a business license here was probably one of the most stressful experiences of my life! Dealing with suppliers can also be a nightmare when it comes to furniture, computers etc. Good level of service and speedy delivery is difficult to find. Thankfully, our team are very professional and have been doing great so far.

One of the most widespread stories coming out of the country right now is Ethio Telecom's privatisation. Despite coronavirus, it has been an eventful quarter for the company and 12 bidders from around the world have expressed an interest to buy 40% equity. Earlier this year, the Ethiopian Government committed to establishing an autonomous telecoms regulator called the ECA. Well-known accounting firm Deloitte are currently verifying the operator’s financial situation and assisting with potential disputes + managing tax/contracts. KPMG are also on-board consulting around asset valuation. Two 15-year licences have been made available for prospective mobile network operators and they are expected to raise over $1 billion in extra revenues. Infrastructure has been a bone of contention because Ethio Telecom argue they have spent billions on it already - so should have the opportunity to rent it out. Big names like Helios Towers were interested in Ethiopia so they could build and then lease to service providers. It remains an ongoing discussion but the Communications Authority (ECA) will have final-say over disputes or issues like that. It will be interesting to see how future services improve for businesses like Teseteo as privatisation takes a hold.

Despite Coronavirus, acquisitions within BPO/KPO/CX have been plentiful over the last two quarters. A few months back Competence Contact Centre (CCC) was bought by TELUS for approximately $1.3 billion. With locations around the world, CCC offer high quality CX solutions including presales, after sales, BPO, digitalization, loyalty services and multilingual capabilities. It will add significant scale and diversity to TELUS's offering and increase the organisation’s estimated enterprise value to around $4.5 billion (Canadian). Here at Teseteo we keep on top of M&A news across our space and much of this has been discussed in previous analysis - www.teseteo.com/analysis Another deal worth mentioning is RingCentral buying First Connect. It is an important step in their goal to reach $1bn annual revenue and will give them a stronger outbound calling functionality. Below is a table compiled by us of different CX SaaS acquisitions that have happened in 2020:

Teseteo have built up some great partnerships to improve the daily running of our business. We work with Addis Ababa University for recruitment-needs and speak to various lecturers/alumni there who supply us with top candidates (including language speakers - German, French, Spanish, Italian). We have also partnered with WebSprix - an internet company based in the same building as ours. They provide our team with an A grade fibre connection including adjustable bandwidth. This means Teseteo can successfully operate 7 days a week 24 hours a day. The Jobs Creation Commission are a Government body our company have collaborated with not just to create opportunities at our own firm - but also generate new jobs throughout the whole of Ethiopia. Connex One are currently our main SaaS provider and offer a fully cloud-based solutions including AI capabilities. They are an excellent cost-effective partner and provide impressive customer service. Teseteo use a company called AFEX for all our international Forex transfers. They have made moving funds between the UK and Ethiopia easier than dealing directly with a bank. This can be done either in-person or via their online platform. MDY Legal are a firm based in the heart of London's legal district and are on hand to assist with any disputes that may occur.

Teseteo are working with the Jobs Creation Commission (JCC) in Ethiopia not just to generate opportunities at our own company - but also promote the country as a top destination for BPO/KPO globally. As one example, the ICT Park in Bole Lemi is spread over 200 hectares of land and once complete, will offer state-of-the-art infrastructure to companies like ours. Teseteo aim to create at least 2,000 inclusive BPO/KPO jobs for Ethiopian people in our own business. We work with the JCC to generate hundreds of thousands of decent jobs across the industry by 2030. Teseteo have partnered with Microsoft's 4 Afrika initiative around training graduates and upskilling our own staff. Sustainable Development and CSR remain a prominent component of our business model and we have a good ESG Agenda in place - www.teseteo.com/esg Because they are an official Government Body, the JCC is in a strong position to promote BPO/KPO in Ethiopia. They are working with us to improve policies and lobby decision makers around topics such as infrastructure, better working conditions and incentives. Our Senior Team meet with Bernard Laurendeau (Commissioner's Advisor) on a weekly basis to discuss FROG (Freelancing, Outsourcing and Gigs) results and modify actions so we are always on course to reach targets. There is also a Taskforce which we are part of with other employers here.

Teseteo support SDG8 so it's a priority for us to scale safely, get people out of informal work and reduce job losses caused by Covid 19. Companies like ours have used lessons learned during periods of disruption to improve operating practices and Coronavirus is no different. Through listening to expert advice, we can minimise, and ideally prevent, any future risk - www.teseteo.com/staff-safety We are also advocating SDG9 (infrastructure) and work with the National ICT Park to improve business conditions. By 2030 it is our goal to have the site at full capacity and host organisations from around the world. In just over ten years infrastructure advancements here include 35,750km of road, 5,000km of railway, a metro service, Africa's biggest damn, 15 industrial parks and of course the ICT Village. However, improvements must continue if Ethiopia is to become the outsourcing hub we wish it to be.

Teseteo have opened up an almost untouched skills-pool by moving to Ethiopia. Our relationship with AAU gives us access to some of the best graduates in Addis Ababa (and beyond) while keeping client's costs low. As well as basic salary and bonus structure - Teseteo also give staff the opportunity to progress their career and move up. We have already trained our first Team Leader and look forward to training more. Graduates here are inexpensive to hire with the Ethiopian Government and Investment Commission advising on wages and monthly rates. There is also an abundance of Universities (50 in total) and over 1,300 Technical / Vocational Institutes. Quality vs cost is excellent. English is the most widely spoken foreign language and the medium of communication in secondary schools as well as universities. French and German are taught/spoken across a number of international schools and both popular degrees at AAU. Last year Bayern Munich FC opened their first African football school in Addis Ababa - testament to the talent available in Ethiopia.

The Ethio ICT Park is currently spread over 200 hectares of land. I have visited the site on 3 occasions - it is an impressive place. They are currently working towards a "Plug & Play" environment to attract more businesses + create further jobs. The Jobs Creation Commission and Ministry of Innovation and Technology (MiNT) work closely with the ICT Park to make sure it is continually growing. Teseteo are also highly involved and hope to move our own office there once we outgrow the current 150m2 workspace. An official BPO/KPO agenda has been put in place to promote the site and assist the JCC reach their 2025/2030 job creation targets. This strategy aims to create in the mid-term 300,000 jobs across the industry as well as in IT manufacturing / enabled services. Entrepreneurship, research, training, and e-commerce are also top of its agenda. The ICT Park currently has 14 active clients and 4 additional companies are currently building offices. Once finished, the project promises to offer state-of-the-art infrastructure+business conditions for all firms based there.

Another strategy the Jobs Creation Commission are utilising to build up Ethiopia as a good destination for outsourcing is upskilling. They are developing training programmes to ensure a significant talent pool is available for companies moving here. Teseteo have similar programmes in place through our Innovation Hub and are currently working with Microsoft's 4 Afrika initiative to implement these. The 4 Afrika SkillsLab trains final year students, fresh graduates and our own staff in new technologies such as cloud computing, artificial intelligence and other modern software solutions. Teseteo will offer four Microsoft SkillsLab Programmes every year and to qualify - applicants must have a degree in Engineering or related fields i.e. computer Science, IT fields, Mathematics. 85% of Skills Lab graduates go on to find full time employment and is it is our goal to have trained 1000+ people between now and 2025/30 which will result in many more occupations nationwide.

Many countries (i.e. India, the Philippines, Czech Republic) have realised the importance of outsourcing and offer incentive packages to BPO/KPO companies operating there. These include tax subsidies, "offshore zones" and free land. The Ethiopian Government and JCC are waking up to this so we are excited about future advancements. BPO businesses generally evaluate new destinations based on a mix of cost, talent working environment. Ethiopia is improving all these areas. At this point in time, the Jobs Creation Commission are focused towards attracting midsized vendors mainly because current business conditions may not attract larger players (i.e. WebHelp, Sutherland). This is something we discuss in our bi-weekly JCC meetings and work is going on towards the formation of a National Pitch promoting Ethiopia as a good location to operate from. As just a few examples - India has a 10-year income tax holiday for BPOs and the Philippines offers tax/duty exemption on imported capital equipment. Other than tax incentives - the Philippines now have dedicated economic zones to drive economic growth (called PEZA) and the Czech Republic now offer dedicated funds for selected outsourcing bases + specialised financing is available as well.

In this case study (see here) I looked at the Jamaican outsourcing industry and some training initiatives there. Another good example is South Africa's Monyetla Work Readiness Programme. Employer-led, government-funded and launched in 2008 - it seeks to prepare entry-level labour (i.e. graduates) for business process outsourcing activities. This involves a 16-week course consisting of initial theoretical and practical training + 160 hours of on-the-job relevant experience. That is followed by six months or longer of employment. Monyetla is made up of a four-party consortium consisting of trainees, recruiters, training providers and employers. The National Skills Fund reimburses each consortium, which then divides the funds among members. For team leaders who succeed in employment, some more funds are available to study further and become NQF Level 2 accredited. Monyetla claim to place 70% of its learners in employment upon graduation (Microsoft's 4 Afrika is more like 85% - 90%). Monyetla also place a lot of emphasis on training team leaders and one home grown supervisor is developed for every six people involved - Teseteo offer similar progression.

Impact sourcing is an area we take great interest in because it involves employing high potential people from developing countries through outsourcing. Samasource, CloudFactory and Taskus are all good examples of companies that use Impact Sourcing - something that could work well in Ethiopia too. Impact sourcing service providers (ISSPs) are a group of organisations within Business Process Outsourcing that work alongside large clients to cut their costs. One niche growing fast involves clients requiring young workers to train their AI algorithms. Certain firms (i.e. Nielsen) specifically choose suppliers who are committed to Impact Sourcing because they want their procurement to have positive social effect. Sutherland Global are another business using the initiative in Jamaica. "You find more humility in non-traditional employees and they're more open to new things," says Odetta Kerr from SG. The Global Impact Sourcing Coalition is a network of worldwide businesses creating jobs for those most in need through the power of procurement and supply chains. You can learn more about their work (and ours) here - www.teseteo.com/esg

This September Dabele Qabeta, Customs Commissioner, announced a number of reforms to cut time and cost previously incurred on investors. Teseteo are also working with the Jobs Creation Commission to improve Ease of Doing Business in Ethiopia - www.teseteo.com/whyethiopia I have experienced first-hand how stressful setting up a business here is. Once you are operational it is fine but the sheer amount of paperwork and running around that's involved can be very daunting. Things need to be drastically improved, so it is welcome news that the Government are putting effort into making processes more streamlined. Latest developments in Ethiopia include eight new laws and 40 reforms focused mainly on 10 institutions. In regards to paying tax and other duties - a new paperless service has been inaugurated. It is called the eCMS-Electronic Customs Management System. Other procedures have also been streamlined including the flow of imports and exports. “We will continue implementing technologically advanced service provision in all sectors to foster economic growth," says Abiy Ahmad. The Ethiopian Investment Commission are also said to be remodelling systems - but from my personal experience they have a long way to go.

Nothing has stirred up more controversy in Ethiopia than the GERD. However, all the moaning, arguing, and complaining aside – this remains a great feat of engineering. It is built on the Blue Nile close to Sudan's border. At a cost of $4.8 billion the Grand Renaissance Dam has a projected capacity of more than 6,000 megawatts and the first stage of filling (which has already begun) is expected to take two years bringing water levels in the reservoir to 595 meters out of an eventual 632 meters. Hydropower production is a main benefit of the GERD and all energy generated will go straight into Ethiopia's national grid. Any surplus electricity that is produced will be exported to Djibouti, Sudan and possibly even Egypt. Up to 7,000 tonnes of fish are also expected to be harvested annually. An area of 5km surrounds the dam's reservoir as a buffer zone for malaria control. This project is funded by government bonds and private donations.

This month Ethiopia issued new currency for denominations of 5 (coin format), 10 and 100 notes + a never seen before 200 bill. Over 3.6 billion ETB ($97 million) has been spent on printing and the Government hope it will radically curb any illegal activities, corruption or contraband. They have enhanced security features and other distinctive elements. “Security plays a key component in the currency change process and relevant authorities together with members of the community will enforce strong implementation,” said Prime Minister Abiy Ahmed. Citizens have three months to exchange old notes with new ones. The last time Ethiopia changed its currency was two decades ago at the end of the Ethiopian-Eritrean civil war so a big move. A lot is paid for in physical cash here so it's a popular decision.

Overall, Q3 of 2020 has been highly productive and it is great to be fully operational with a headcount of 12 and ambitious growth plans. Clients want to work with Teseteo because they can get access to a brand-new talent pool at unbeatable prices. Companies scale faster with Teseteo because there are no initial hiring costs and no expensive wages. Simply great people! Our cost-effective offshored solutions include AI blended CX, technical support, knowledge process outsourcing and other back office tasks. We support Sustainable Development Goal 8 and have a strong ESG Agenda in place. Comprehensive training gives staff first-hand experience of the products and assignments they are supporting from day one + our senior team have over 20 years’ experience each within outsourcing/offshoring.